The Information Contents of VIX Index and Range-based Volatility on Volatility Forecasting Performance of S&P 500
AbstractIn this paper, we investigate the information contents of S&P 500 VIX index and range-based volatilities by comparing their benefits on the GJR-based volatility forecasting performance. To reveal the statistical significance and ensure obtaining robust results, we employ Hansen's SPA test (2005) to examine the forecasting performances of GJR and GJR-X models for the S&P500 stock index. The results indicate that combining VIX and range-based volatilities into GARCH-type model can both enhance the one-step-ahead volatility forecasts while evaluating with different kinds of loss functions. Moreover, regardless of under-prediction, GJR-VIX model appears to be the most preferred, which implies that VIX index has better information content for improving volatility forecasting performance.
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Bibliographic InfoArticle provided by AccessEcon in its journal Economics Bulletin.
Volume (Year): 29 (2009)
Issue (Month): 4 ()
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Range-based volatilities; GJR-based volatility forecasting; VIX index; SPA test;
Find related papers by JEL classification:
- C5 - Mathematical and Quantitative Methods - - Econometric Modeling
- G1 - Financial Economics - - General Financial Markets
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